As leadership upheavals rock major corporations like Boeing, Delta Airlines and Disney, some Yale School of Management professors have published widely-read reflections on what they perceive to be the causes of the problems and on the adequacy of the measures the companies’ boards have taken in response.
While professors did not unanimously agree on the causes of the problems many companies have had with their CEOs, they said the situation has the potential to cause positive changes in how corporations are run, despite the difficulties corporate leaders currently face.
Yale officials praised former Procter & Gamble CEO John Pepper Jr. ’60, who was appointed Vice President for Finance and Administration Tuesday, as a high-profile example of an ethical CEO.
SOM professors said although many corporations today face ethical and financial challenges, they will ultimately recover.
“One of the great things about our economic system is that it’s tremendously robust, and if there’s a problem and people have incentives, they solve it,” Rick Antle, accounting professor and senior associate dean of the SOM, said.
SOM Associate Dean Jeffrey Sonnenfeld, who has written about corporate leadership problems in such publications as The New York Times and The Wall Street Journal, attributed the conflicts to a lack of credibility on the part of CEOs.
He said former Tyco International CEO Dennis Kozlowski, who came under fire this fall for receiving excessive compensation, is an extreme example of these issues. As CEO of Tyco, Kozlowski bought up companies dealing with manufacturing, home security, medical supplies and baby diapers.
“Nobody stepped back to ask what value’s being created here — as he was busily stapling together a bizarre pileup of unrelated businesses,” Sonnenfeld said. “Nobody had the full, big-picture perspective to feel they could challenge the grand but obtuse vision of the CEO.”
Sonnenfeld said even CEOs not involved in scandals like the one at Tyco have undermined their own credibility by less noticeable means — for example, by delivering formulaic public speeches in which “they’re just mouthing a lot of platitudes that have been prepared by public relations officials,” he said.
Antle said he thinks it is too early to discern general, underlying causes of corporate governance problems, but scandals involving CEOs have at least temporarily made it more difficult to be a leader.
“A lot of the people that have been thought to be the poster boys usually of corporate leadership have been in a lot of trouble [recently],” Antle said.
In response to scandals and low performance, companies like Delta and McDonnell Douglas have chosen to bring back their former CEOs to assist in recovery from finance problems and questionable contract negotiations, respectively.
“Retirees can come back and take charge and have a lot to offer,” Sonnenfeld said.
While commentators have disagreed over the timing of the boards’ actions in replacing their leaders — some say CEOs have been replaced too hastily — Sonnenfeld said the boards have often been too slow to make changes.
Both Antle and Sonnenfeld said the current struggles ultimately have the potential to create positive, lasting effects on executives’ behavior.
“What we have yet to see is whether there’s going to be some kind of change in the attitudes of corporate America, or is this ultimately going to end up looking like, ‘Thank God we got through that,’ and go back to the same old thing,” Antle said.
In addition to Antle’s and Sonnenfeld’s contributions to corporate discourse, SOM professor Paul MacAvoy recently co-authored a book on corporate governance problems. The book, titled “The Recurrent Crisis in Corporate Governance,” has yet to be released.
Professor MacAvoy was not available for comment.